What Every CEO Should Know About Creating New Businesses, Markets and Products

I have been looking for a resource that would outline to business owners the macro challenges of new ventures. I found an older article from the Harvard Business Review by David A. Garvin, July -August 2004 issue.

Starting a new venture is time consuming and can be costly. If you have questions on assessing risk and return and your personal or in-house capability to be successful please let us assist you in answering these questions. Following is the article.​“Some problems,” wrote Laurence J. Peter, the business humorist, “are so complex that you have to be highly intelligent and well informed just to be undecided about them.” Top-line growth is one of those, especially when it comes to creating new businesses within large, complex companies. The challenges are vast, and it’s diﬃcult to know how, or even whether, to move forward. Most CEOs would beneﬁt from having a few rules of the road.

Fortunately, scholars have studied the problem for decades. And whether they’ve called it “new business creation,” “corporate venturing,” “corporate entrepreneurship,” “corporate innovation,” or “intrapreneuring,” their observations have been remarkably similar. Yet these ﬁndings have seldom been summarized or presented in an easily accessible form. Here, then, is a primer on the topic--the ten things every corporate venturer should know.

1 Ultimately, growth means starting new businesses.Most ﬁrms have no alternative. Sectors decline, as they did for Pullman’s railroad cars and Singer’s sewing machines. Technology renders products and services obsolete—the fate Polaroid suﬀered, as digital cameras decimated its instant photography franchise. Markets saturate, as Home Depot is now ﬁnding, after establishing more than a thousand stores nationwide.

2 Most new businesses fail.New businesses may be necessary for long-term growth, but successes are hard to pull oﬀ. The numbers are downright depressing. In the 1970s and 1980s, 60% of small-business start-ups failed in their ﬁrst six years. Large companies did only a bit better. A study of sizable corporations during the same period, which included such household names as DuPont, Exxon, IBM, Procter & Gamble, Sara Lee, 3M, and Xerox, found that they divested or closed 44% of their internally generated start- ups and 50% of their joint ventures in the ﬁrst six years.

3 Corporate culture is the biggest deterrent to business creation.New ventures ﬂourish best in open, exploratory environments, but most large corporations are geared toward mature businesses and eﬃcient, predictable operations. When a company’s leaders recognize and support mavericks, encourage diverse perspectives, tolerate well-reasoned mistakes, and provide resources for exploratory ventures, employees are apt to embrace entrepreneurship. When leaders reward conformists and rule followers, insist on acceptance of the party line, demand error-free performance, and tightly ration resources, employees are likely to shun exploratory projects. New ventures whose operating sponsors are close to the action and know their businesses intimately tend to do better than those championed by the CEO alone.

4 Separate organizations don’t work—or at least not for long.If new ventures require a new environment, the reasoning goes, they should be in a separate unit. Accordingly, from the 1960s through the 1980s, such companies as Boeing, Exxon, GE, Gillette, Levi Strauss, and Monsanto set up separate internal venture divisions. In the 1990s, companies like Bertelsmann, Chase, Intel, and UPS favored corporate venture funds that would act like Silicon Valley venture capitalists, nurturing nascent businesses by oﬀering managerial oversight, funding in stages, and technical advice. But allowing a diﬀerent culture to ﬂourish in either type of separate organization eventually leads to repeated power struggles and culture clashes, which members of the mainstream organization invariably win. Interest in the new ventures tends to be cyclical. Brief surges of enthusiasm, triggered by abundant resources and the desire to diversify, are followed by sharp declines. The life spans of both internal venture units and corporate venture capital funds, therefore, tend to be short —on average, only four to ﬁve years.

5 Starting a new business is essentially an experiment.New ventures can go wrong in so many ways. They can encounter customer failures (insuﬃcient demand or unwillingness to pay for the product or service), technological failures (inability to deliver the promised functionality), operational failures (inability to deliver at the required cost or quality levels), regulatory failures (institutional barriers to doing what’s desired), and competitive failures (a competitor’s entry changes the rules of the game). These setbacks are unavoidable, and no amount of TQM or eﬃcient management will anticipate them all. There’s usually no alternative: A new venture simply has to prototype its initial concept, get it into the hands of users, assess their reactions, and then repeat the process until it comes up with an acceptable version. IBM calls these eﬀorts “in-market experiments”; scholars call them “probe-and-learn processes.”

It follows that perfectionist cultures (and planning-oriented managers) are in for a rude awakening, since it’s seldom possible to ﬁgure out product designs or business models fully in advance. Repeated investments in rigorous, fact-based planning or quantitative research inevitably produce diminishing returns. Motorola found this out the hard way. In the mid-1970s, when cellular telephones were in their infancy, managers mailed out a survey to several hundred thousand potential users and then ranked the leading market segments; salespeople ranked 31, way down the list. Yet when prototypes were handed out, salespeople proved to be among the most devoted users, leading the adoption process and purchasing phones in large numbers.

The need for speedy feedback is not, however, an excuse for sloppiness. Managers must think hard about the design of their experiments. Scientists like to talk about an experiment’s “discriminating power”—its ability to distinguish between two competing hypotheses. All too often, in-market experiments do not. Managers manipulate too many variables at a time: A computer manufacturer simultaneously changes a product’s features, marketing, and pricing and then struggles to determine which was the critical success factor. Or they fail to build in controls: A retailer tries out four diﬀerent store formats, in four diﬀerent locations; because each location has a diﬀerent socioeconomic proﬁle, there’s no baseline for comparing proﬁtability from store to store. Or they fail to agree on the deﬁnition of success: A bank tries out a variety of branch layouts and ﬁnds that some increase traﬃc, others attract new customers, and still others increase the sales of more proﬁtable services. Executives can’t decide which layout to choose because they had not previously ranked the value of each outcome. Good experiments begin with clear, explicit objectives; they’re designed to produce targeted insights and rapid feedback; and they generate measurable, actionable results. Scientists like to talk about an experiment’s ability to distinguish between two competing hypotheses. All too often, trials of new ventures do not.

6 New businesses proceed through distinct stages, each requiring a different management approach. Experimentation is only the ﬁrst step in an extended, multistage process of business development. Each stage introduces a diﬀerent set of questions and challenges.

THE RIGHT QUESTIONSNew businesses go through three main stages, and in each, the critical questions executives need to answer are very different.Experimentation StageWhat products or services should we offer? Are they technically and economically feasible? Can we make money?Expansion StageHow rapidly should we expand the business? How should we grow? By expanding into new offerings? New customers? New geographical areas? What financial and human resources are required? How will they be obtained? How should the new business be organized and managed to ensure short term success?

Each stage also demands diﬀerent talents and perspectives, and new leaders usually have to be brought in as businesses progress. The visionary who is well suited to leading a new business through its early experimental stages is often poorly equipped to guide the venture through the expansion and integration stages, when sales and organizational skills become more important than bold thinking and creativity. Nor can performance measures remain immutable. Because newbusinesses are seldom proﬁtable in their early, formative years, ﬁnancial metrics make little sense as a starting point for evaluation. Instead, milestones of various sorts—the number of prototypes in customers’ hands; the number of times analysts mention a hot, new technology; the number of salespeople bringing in leads—are more useful indicators of early progress. During expansion, measures of market penetration and market share become important; as the business becomes established, traditional ﬁnancial measures can be installed.

7 New business creation takes time—a lot of time. In most cases, the three stages of business creation take years to unfold. Experimentation, in particular, is extremely time-consuming. concepts are diﬃcult to validate, and customers’ ﬁrst reactions are not always good predictors of long-term sustainability. Home Depot opened its ﬁrst Expo Design Center in 1991, built seven additional stores over the next few years to explore diﬀerent formats and layouts, and didn't roll the concept out on a large scale until late in 1998. Managers hoping for quick returns are certain to be disappointed. The best study on the subject, which examined nearly 70 corporate ventures in the 1960s and 1970s, found that new businesses took an average of seven years to become proﬁtable. None of the businesses had a positive cash ﬂow in its ﬁrst two years.

8 New businesses need help fitting in with established systems and structures.Probably the greatest concern of new-business leaders is that they and their ventures will become organizational orphans. Especially when they combine oﬀerings from several divisions or target markets that fall into the white spaces of the organization chart, ventures ﬁnd it diﬃcult to secure an organizational home. They frequently ﬁnd themselves shunted from one division head to another, as reporting relationships constantly change. The trick, says one experienced venturer, is “to achieve the right balance between identity and integration.” Too much independence, and the business will be an orphan; too tight a link to established divisions, and the business will fail to diﬀerentiate itself.

On other occasions, support fails to materialize because of a perception that the new business will never become big enough to “move the needle” and make a substantial contribution to revenues or proﬁts. The problem is, ﬁnancial predictions are tricky because of high levels of uncertainty. Large forecast errors are common—in one study, ﬁrst-year sales forecasts were oﬀ 80% and ﬁrst-year proﬁt forecasts were oﬀ 116%—making new businesses easy targets for critics. Go/no-go decisions should seldom be based on whether a new business has large initial returns or has met its budget targets.

9 The best predictors of success are market knowledge and demand-driven products and services. When you launch a new venture, pick a product or service close to the ones you already oﬀer. Success rates rise substantially when new businesses target familiar customers and are staﬀed by people well acquainted with the market. New businesses launched simply to commercialize research ﬁndings rather than meet market needs are best avoided. Unfortunately, most engineers prefer working on the latest and greatest technology. It’s therefore wise to ask: “What’s the pain point for customers, and how does our oﬀering overcome that pain?” Without such discipline, new ventures are likely to end up as solutions looking for problems.

10 An open mind is hard to find.The biggest hurdle for new businesses is mental—the way senior managers think about products, services, technologies, customers, and competitors. Every established company is based on an implicit theory—a largely unstated view of how the business works and money is made. Polaroid is a telling example. As my Harvard colleagues Mary Tripsas and Giovanni Gavetti have reported, its powerful business model was based on the concept of razors and blades. Cameras (the razors) were viewed as a necessary evil; the real money came from sales of ﬁlm (the blades). Digital cameras looked like razors. Senior managers kept asking, “Where’s the ﬁlm? There’s no ﬁlm?” recalls an employee in Polaroid’s electronic-imaging division. “So what we had was a constant ﬁght with the senior executive management in Polaroid for ﬁve years.”

Sadly, many executives view all new businesses through the same ﬁlters and judge them on how well they conform. But few new businesses can meet that test—nor should they. If they do, every new business will look just like the old.

​DEMI Consulting has been involved with CETA through the Brussels office for a number of years from inception to implementation. We have become familiar with the numerous and very different regulatory regimes in each of the EU countries. In addition we have developed connections that will be of benefit to Canadian firms interested in EU countries.

Large and medium size corporation have the financial capability and internal staff to move on the benefits of CETA. CETA just opens the door making it easier than before but all strategic growth procedures required as in domestic markets must be undertaken. In addition an understanding of local markets and regulatory regimes in the country you want to either sell to or buy from must be known otherwise the chances of success diminish and the costs increase reduces required returns.

Small business those under 100 staff and annual revenue under €10 million or C$15 million do not have the resources of large companies but there are significant benefits now available under CETA to obtain a market presence in EU countries. The challenge is how they do so with less cost, less risk and more return.

We have researched provincial and government web sites on CETA and find minimal or no resource on how to reap the benefits made available by CETA by small businesses. We checked out the funding available and Trade Commissioners support and they all fall short to address the needs of small business even to assess potential opportunities. In the EU the resources and funding support for small businesses is significantly more advantageous than Canada.

Our experience and our Canadian and EU networks along with our strategic growth competencies that are available to small Maritime businesses can allow them to assess EU country opportunities, develop a marketing strategy, find on the ground EU partners and penetrate the targeted market. We are here to assist in each stage of the process.

All businesses looking into operating outside of their own country must be aware of different cultures, methods of operation, banking and regulations from your home country. Small businesses require more upfront assessment of risk and opportunity because they do not have the human and financial resources to learn from their mistakes. It is usually one and done either success or failure.

Following are a number of factors that could be inhibiting small businesses but with support from knowledgeable resources in international trade, country uniqueness and funding avenues these challenges can be overcome and higher probability of success ensured. ​​

Country regulatory legislation may be different in each of the 27 EU member countries and these may be changed at the will of each country to the disadvantage of Canadian companies within or to enter their jurisdiction. From our assessment currently within CETA there is not dispute resolution so there would be no assistance from the Canadian government on regulations changes that harm Canadian companies or prevent them from doing business in the country. There are examples currently in the AgriFood and Seafood sectors as a result of a unilateral regulation change by individual EU countries. In these cases Canadian companies may not have assumed access to these counties markets.

For those that think government trade missions are the answer they may be if you have done your homework, lined up high probability buyers or partners and have agreements ready for signing. In many cases small businesses are looking singularly at the trade mission as an opportunity to obtain international business. If the homework has not been done as previously outlined and a budget for a return trip is not in place then the trade mission is an expensive vacation. Trade mission are good if it considered a place for a face to face to finalize a deal.

There are significant opportunities for small businesses to sell into EU countries leveraging CETA. CETA opens doors to opportunities that may have been closed previously due to tariffs. As we have stated before success requires doing the research and accessing the expertise to provide the process, the unique knowledge of the country targeted and access to business networks for on the ground support.

All businesses looking into operating outside of their own country must be aware of different cultures, methods of operation, banking and regulations from your home country. Small businesses require more upfront assessment of risk and opportunity because they do not have the human and financial resources to learn from their mistakes. It is usually one and done either success or failure.The feedback I have received by participants at CETA Business Forums put on by the Canadian Trade Commissioners Service is that participation by small businesses is slow. 98% of Canadian businesses fall under the small business definition of less than 100 staff and revenue under C$15 million. CETA appears to have been developed primarily for the other 2% being medium and large corporationFollowing are a number of factors that could be inhibiting small businesses but with support from knowledgeable resources in international trade, country uniqueness and funding avenues these challenges can be overcome and higher probability of success ensured.

One key item that must be highlighted is the cost in taking advantage of new trade deal like CETA. What is the cost in terms of manpower (i.e., senior management/owners time), airfare, hotels, daily expenses, in-country costs, trade show or networking event fees, cost of shipping goods, etc. …unless these costs are recovered in one year, or an immediate new sale, then small businesses are not inclined to do anything available under CETA. The current funding programs in federal or provincial governments are severely inadequate (50%) or less or nothing on some essentials. This area of providing incentives and funding to at least investigate opportunities must be modified. Perhaps 100% Government assistance on the first trip with verification that the required upfront work is completed.

The assisted from the Federal government to small businesses in obtaining free advice from Canada’s Trade Commissioners in a far off country is very expensive to access if you have to book fights and hotels chasing deals that may not come to pass for reasons beyond market considerations.​

There are significant opportunities for small businesses to sell into EU countries leveraging CETA. CETA opens doors to opportunities that may have been closed previously due to tariffs. As we have stated before success requires doing the research and accessing the expertise to provide the process, the unique knowledge of the country targeted and access to business networks for on the ground support.

Our client has identified a business opportunity in the Bioresonance field to provide bioresonace devices to health care professionals and to the patients for self use. ABC Inc. is the business that will address this opportunity. NeuroFeedback therapy and other related products that also enhance one’s life style and health are other opportunities that ABC Inc. will address. Our process in new business engagements is to perform a project overview by first obtaining details from the client on the work they have done to this stage and find out why they think this would be a profitable business. We then working with the client to create a model of the company using assumptions obtained from preliminary research. Based on the information and conclusions from the project overview the feasibility study may be performed.

BioResonance Therapy (BRT) is a painless and quick method of testing and treatment that offers the possibility of specifically treating all kinds of diseases successfully. BioWellness Inc. provides the devices and software used in BRT.

Project Overview StageBased on the information obtained from the client and preliminary research on the sector and competitors the following information, business overview and business model was developed. The financial information has not been shown for this public web site. For those that may be interested in learning more about this opportunity please contact us.

Motive to create the Business.The primary reason for setting up the company is to earn a living in an environment where one can be creative in how to operate and where there are no limits on personal and financial growth. The focus on health care devices serves two purposes being helping those that need specific healing that may not currently have access to the therapy or procedures due to cost and the need to go to health professional faculties. Another motive is to grow the company employing many employees with the facilities but through the UK and Ireland and eventual globally.

Client’s Sales ProjectionsThe following information is based on the company being self funded with limited financial resources except for a government start up grant of £xx. Reasonable expectations regarding staffing is that in the first 6 months all staff will be on a part time basis as the need arises. The company forecast growth is initially xx devices monthly and after the first 3 months growing to xx devices monthly over the next 12 months. At that stage the company will need 2 in-house staff and up to 8 distributors or sales agents within London and the rest of the UK and Ireland.

The ProcessIn reviewing the inhibitors of success one was the geographic location of the sourcing of some components therefore to overcome this inhibitor the company will assembly all electronic health care devices initially the resonance device in the UK. The devices internal components will be purchased in manageable bulk. New device components will be assembled with different skins and design covers to appeal to the market place. The company's branding and labels will also be applied. As part of the assembly process specific software for specific clients or generic markets will be loaded to the devices. Finally all devices will be tested to prescribed standards before boxing and wrapping. All products we sell will be assembled and distributed in the UK and sold under the Company's brand. We will continually be abreast of the sector to identify new products and therapy requiring our current or new devices.

Management and StaffingInitially the management and staffing structure is very simple the owner until volume increases to the levels previously mentioned then most in house duties will be allocated to staff and the owner will be seeking new products and markets while managing operations. In areas where subject experts are required in operations, procurement, quality control and marketing and sales external resources will be contracted using project budgeting and management.

The MarketThe market falls into three categories. Patients, the ones that want to purchase directly for their own personal use. In addition Health and Physical Fitness professionals that use the devices for patient therapy in their facilities or to resell to their patients. The last market is to company's resellers and agents with in the Company's distributor or agent program. The geographic market at the start will be the UK and Ireland. Currently the market has competitors that provided devices and support to health facilitates where patient have to attend regular therapy sessions at the health professionals facility to continued therapy. BioWellness Inc. provides hand held devices that the patient can purchase and easily use the device themselves.

Following are the list the main aliments or sicknesses that the device with the applicable software can assist in healing; The list consists of 11 ailments and are available upon request.

Preliminary FinancesThe following information is based the knowledge of the client who is familiar with the sector and the competition. The financial projections at this time are limited to the initial devices being marketed. The retail prices of the products with specific software range from £xx up with an average of £xx.

In assessing projected costs of the business to be financially successful under the current financial resources at start up the company needs and average profit margin per Bioresonace device of £xx. To accomplish this profit margin the following costs must be attainable. The procurement costs of the preassemble must be £xx or less. Internal assembly, skin and shell costs as well as software including assembling labor and direct overhead would result in the cost of goods sold must not exceed £xx. The gross margin of the device must be £365 or less. Assuming an average reseller commission of £xx per unit and 50% of all sales through resellers the average profit margin per unit before owners drawings must be £xx or greater.​Based on the assumptions of projected volume, pricing, margins and the sales start date no later than January 2019, the revenue for the first 12 months would be £xx with profit before owner drawings of £xx. The revenue for year 2 would be £xx with profit before owner’s drawings of £xx. These numbers are dependent on current assumption of market, external business environment and limited start up funding of £xx.

Feasibility Study StageDEMI Consulting is now working with the client assessing the Project Overview Stage information. The client wants to proceed to the feasibility stage. The client has decided that they want the company to grow significantly larger than envisioned so the feasibility stage will include setting a target of obtaining a percentage of the market share in the UK and Ireland of Bioresonance devices and expand to the EU and globally. With the enlargement of the vision there is a need to obtain additional financing. The client has asked for a financing proposal to prepared after the feasibility stage based on the results of the study.

The first step in the feasibility stage is to verify all assumption reflected in the project overview. The feasibility stage encompasses many of the essential components of the financing and business plan with the addition of continually review new information to determine if the project remains feasible.

DEMI Consulting Process The project provides an overview of the first stage of engagement process. Each engagement is different and the process is customized to each client. For more information please contact us.

Are Government Economic Development Programs Helpful or Harmful? Information to Allow a Small Business Owner to Make this Decision​Following is information, observations and thoughts surrounding my experience with government programs. I expect there may be those that disagree. My objective is to provide information to prepare a business owner in advance of partnering with governments. Buyer beware is always the case in all transactions.

Governments preoccupation with business expansion into new markets, international trade, new innovation and preferred sector support is a death blow to a majority of existing small Canadian businesses that to have to fix their own house first but are ignored because they do not fit the governments profile of a worthy businesses due to not adhering to the government expansion mandate.

The real meaning behind the saying “I am from government and I am here to help you” is, I am from government to leverage you businesses and you to fulfill our objectives and when we find out your are disposable you will be on your own, broken and broke. A failure in their eyes and the other businesses they interact with since it is never the government’s involvement and direction that causes the demise of your company.

The key to success in leveraging government’s involvement is do your homework, determining how to leverage their resources and ensuring a ROI on every dollar spend or invested. Do not allow them to leverage you unless you remain in control. You are the authority and subject material expert on you business and markets. Don’t let them manage you.

The hype of expansion and government’s encouragement to get you on board is quite tantalizing to small business owners. The thinking can go like this “I have problems with my current company but if I tape into government support into their programs this will be the solution and we will be successful.”

The old hard and true path to business success is to take care of what you have, make sure it is working well and have the talent and finances first before expansion. If something is broke and you call on it to do more, the problems and risk increase significantly?

I have been observing governments, accounting firms, consulting firms and international trade law firm’s pronouncements and all talk about expansion and successes. I have never seen a list of companies they are involved in that have failed and they have discontinued involvement. I think that Canadian small businesses would learn more from the failures than the successes.

For those that think government trade missions are the answer they may be if you have done your homework, lined up high probability buyers or partners and have agreements ready for signing. In many cases small businesses are looking singularly at the trade mission as an opportunity to obtain international business. If the homework has not been done as previously outlined and a budget for a return trip is not in place then the trade mission is an expensive vacation. Trade mission are good if it considered a place for a face to face to finalize a deal.

The take away from this post is “Before expanding or getting government involved fix what is broke so you can focus on expansion if and only if you fully understand the risk, cost, return and payback period.” A full assessment of your organization must be done to ensure you are ready for expansion. If you are not ready you will lose. Make sure the decision is based on good research and you are comfortable that success will be obtained. Another old saying is that if you need government involve moving forward on any project to meet the required ROI to obtain financing you should not be doing the project.

Government business assistance programs can be valuable tools and resources but they are not cure alls and no substitute for good performance management. Expansion is in most cases successful in successful companies and disaster for under performing ones.

Be smart, do your research, have a realistic plan and have the knowledge within or available to support you. You cannot run a business and expand by yourself.​If you have any questions please contact us.

YOU THINK YOU HAVE A PROBLEM! HOW DO YOU KNOW? HOW SIGNIFICANT IS THIS PROBLEM TO YOUR BUSINESS? ​Talking about your business problem takes up more conversation than your success. Many times, when I hear someone discuss their problem I think to myself I wonder if this is the problem or just a symptom or if their expectation that is not being met is reasonable. I also wonder how many perceived problems this person has and how do they determine which one to solve since they all can not be worked on simulations.

It is interesting that problems in life and business are common occurrences but how much training is applied to problem solving processes, not much. The first step in solving problems is to know what the definition of a problem is.

What is a problem? A problem is the gap between what is occurring and what either should be occurring or we want to occur.It should be easy to identify the problem but in most cases when we look below the surface we see that perhaps there are multiple problems within each and we then realize that more study is needed to find the focus towards a solution to ensure resources are not being wasted or unproductive.

How do we ensure that our effort is toward an effective and efficient solution? We do this by first defining the problem which includes an assessment of the current situation and desired outcome. This exercise’s depth is based on the significance of the problem on the company and the people that it affects. We develop the problem definition and document it for constant reference in the solution process of the exercise.

We have now defined the problem which will show the competency sets and other non- human resources needed to approach a solution.

As stated everyone and every business have more than one perceived problem and we also know that limited resources exists. So how do we determine where these resources go.We need to establish the priority of the problem. We do this by answering the following questions. (Rank the answer to each question from 1 to 5 with 5 the most significant)

Will this unresolved problem threaten the survival of the business or key relationships? (Weighting of 5)

Will this unresolved problem inhibit the company ability to grow? (Weighting of 4)

Will this unresolved problem prevent succession or the sale of your business realizing required value? (Weighting of 3)

Many of the problems may contribute to your ranking in each. When comparing the ranking score for each problem to the others, the allocation of resources will become evident based on priority ranking scores. As always business knowledge should be allied when making a final decision on resource allocation to each problem.

​At this stage we have a problem definition, an understanding of the unique resources need for the solution process and a measurement of where to allocate limited resources.

What next? Assign the resources to the selected problem and start the problem resolution process. One warning in problem solving is to focus on the problem definition. In many cases in the process other related or indirect problems may appear which could distract one from staying within the definition. If the consensus is the new problem is significant then undertake the problem process outlined here and reset the priorities to determine resource allocation.

At DEMI Consulting we solve problems and can assist in both the problem definition, resources needed and priority setting as well as undertaking the problem resolution process for most industrial sectors and functional areas within a business.

​Leveraging Your Assets For Maximum Efficiency and Profits

There is constant discussions on Leveraging. I thought it interesting to expand on the meaning and outline the many different options leveraging can play in obtaining profit for a business. This article provide a very clear discussion on leveraging options.​​Leveraging Your Assets For Maximum Efficiency and Profitsby : gsdodge

If not, or if you're not sure what leveraging means or why you would want to leverage your assets, then keep reading.

What do I mean by leverage? Well, in financial terms, to leverage a resource means to multiply the productivity of the resource. That is, to get that particular resource to yield a greater return without additional input of effort.

For example, if you can show your sales people how to get your customers to increase their average purchase amounts by 15% with no additional cost or effort then you have just leveraged your sales staff and increased your profits by 15%.

One technique for leveraging your sales personnel is by having them offer your customers an up sell at the time of sale. I'm sure that if you ever ordered a hamburger from McDonalds you will have been asked, "Would you like fries with that?" or "Supersize it?" These are examples of upselling at the time of sale and a leveraging of the sales agent by simply having them ask a simple question when taking the order. No additional expense or effort is required, yet a surprisingly larger number of customers will purchase the upsell item thus increasing the amount of the sale.

For an online business, the order form may have options for upsells as well. The upsell may be a Silver, Gold or Platinum version of the basic product or service or perhaps an additional related product at a reduced price if purchased at the same time as the basic product.

To leverage the online thank you page after a person subscribes to your ezine or requests a free special report, you can place a one-time special offer on the thank you page.

In each case, some percentage of customers will take you up on the upsell offer. Depending upon the offer, you can often expect that anywhere from 15% to 40% or more customers will accept the upsell offer, thus increasing your profits without any extra effort on your part (other than adding the upsell offer to the thank you page).

How about leveraging an ad? Let's say that you consistently run an ad in a local newspaper or trade journal. If you adjust the copy in your ad but keep the overall size of your ad the same and then find through testing that your new copy outpulls your old ad by 10%, that's 10% more profit for the exact same cost and effort.

What resources can be leveraged?

You can leverage a wide variety of resources including, ads, headlines, prices, publicity, in-store sales, field sales, average purchase amounts, repeat sales, referrals, new customer leads, lead conversions, order pages, thank you pages, ebooks, special reports, articles, and on and on. Just use your imagination and you'll be surprised by the number of resources you can leverage significantly.

For example, this article could have been simply posted on my website for site visitors to read or included as a feature article in my offline newsletter or online ezine for my own subscribers. Using it in more than one place for different audiences is a form of leverage. But the article can be further leveraged by also posting it to article directories, forwarding it to other ezine publishers who may wish to publish it in their ezines or on their own websites, including it as part of a special report or even as part of an offline book or online ebook.

Remember, for maximum efficiency and profits, be sure to leverage your assets.